1.2.2.1 Holding Period Returns
Perhaps the simplest type of return is a holding period return. A holding period return measures the total return on an investment over the time period that the investment was held. Its calculation includes the capital gain or loss on the investment and any income earned while the investment was held. The time period may be less than a year or more than a year. The important fact to remember is that a holding period return is not annualized, so the investor must be careful when comparing holding period returns. Holding period return may also be called total return.
Holding period return =[ income earned + (investment’s value at sale – original investment)] / original investment
Consider the following two examples.
Example: William purchased 300 shares of Regal Robots Corporation at $100 per share. Five years later,